Prime Products hopes to borrow $73,000 on April 1 and repay it plus interest of $1,080 on June 30. The following data are available for the months April through June, during which the loan will be used: On April 1, the start of the loan period, the cash balance will be $41,800. Accounts receivable on April 1 will total $182,000, of which $156,000 will be collected during April and $20,800 will be collected during May. The remainder will be uncollectible. The company estimates 30% of a month's sales are collected in the month of sale, 60% in the month following sale, and 8% in the second month following sale. The other 2% are bad debts that are never collected. Budgeted sales and expenses for the three-month period follow: April May June Sales (all on account) $316,000 $575,000 $264,000 Merchandise purchases $ 214,000 $193,000 $ 151,500 Payroll $ 34,200 $ 34,200 $27,300 Lease payments $31,600 $31,600 $ 31,600 Advertising $ 74,000 $ 74,000 $ 43,000 Equipment purchases -- $ 70, 500 Depreciation $31,000 $ 31,000 $ 31,000 Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases during March, which will be paid in April, total $175,000. Required: Calculate the expected cash collections for April, May, and June, and for the three months in total. Prepare a cash budget, by month and in total, for the three- month period. Assume the $73,000 loan is made on April 1 and repaid with interest on June 30.
Prime Products hopes to borrow $73,000 on April 1 and repay it plus interest of $1,080 on June 30. The following data are available for the months April through June, during which the loan will be used: On April 1, the start of the loan period, the cash balance will be $41,800. Accounts receivable on April 1 will total $182,000, of which $156,000 will be collected during April and $20,800 will be collected during May. The remainder will be uncollectible. The company estimates 30% of a month's sales are collected in the month of sale, 60% in the month following sale, and 8% in the second month following sale. The other 2% are bad debts that are never collected. Budgeted sales and expenses for the three-month period follow: April May June Sales (all on account) $316,000 $575,000 $264,000 Merchandise purchases $ 214,000 $193,000 $ 151,500 Payroll $ 34,200 $ 34,200 $27,300 Lease payments $31,600 $31,600 $ 31,600 Advertising $ 74,000 $ 74,000 $ 43,000 Equipment purchases -- $ 70, 500 Depreciation $31,000 $ 31,000 $ 31,000 Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases during March, which will be paid in April, total $175,000. Required: Calculate the expected cash collections for April, May, and June, and for the three months in total. Prepare a cash budget, by month and in total, for the three- month period. Assume the $73,000 loan is made on April 1 and repaid with interest on June 30.
Chapter9: Accounting For Receivables
Section: Chapter Questions
Problem 24Q: Chemical Enterprises issues a note in the amount of $156,000 to a customer on January 1, 2018. Terms...
Related questions
Question
Transcribed Image Text:Prime Products hopes to borrow $73,000 on April 1 and repay it plus interest of $1,080 on June 30. The following data
are available for the months April through June, during which the loan will be used: On April 1, the start of the loan
period, the cash balance will be $41,800. Accounts receivable on April 1 will total $182,000, of which $156,000 will be
collected during April and $20,800 will be collected during May. The remainder will be uncollectible. The company
estimates 30% of a month's sales are collected in the month of sale, 60% in the month following sale, and 8% in the
second month following sale. The other 2% are bad debts that are never collected. Budgeted sales and expenses for the
three-month period follow: April May June Sales (all on account) $316,000 $575,000 $264,000 Merchandise
purchases $214,000 $193,000 $ 151,500 Payroll $ 34,200 $ 34,200 $27,300 Lease payments $31,600 $31,600 $
31,600 Advertising $ 74,000 $ 74,000 $ 43,000 Equipment purchases $70,500 Depreciation $31,000 $31,000 $
31,000 Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise
purchases during March, which will be paid in April, total $175,000. Required: Calculate the expected cash collections
for April, May, and June, and for the three months in total. Prepare a cash budget, by month and in total, for the three-
month period. Assume the $73,000 loan is made on April 1 and repaid with interest on June 30.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Recommended textbooks for you
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College